5 MINUTES TO KNOW MARKET SENTIMENT

The primer looks at some of the biggest crises in the last few decades, which everyone should be aware of. Although these crises have manifested?across decades, their underlying principles seem eerily similar- speculation leading to a massive increase in asset prices(e.g. real estate, stock markets) followed by a panic sell-off and a huge drop in consumer sentiment further continued by?the eventual resurrection of the economy led by easing monetary policy and tapering of adverse consumer sentiment.

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• THE GREAT ECONOMIC DEPRESSION OF 1929-1939

It is by far the worst economic crisis of the 20th century, led by the United States and eventually by other nations. The genesis of the crash was the crash of the American stock markets in 1929, dipping 29% over a short period of time. It was preceded by a booming stock market that rose four times from 1921 to 1927 on the back of easy money availability, which led to a depression in consumption in sectors like construction and auto which were heavily dependent on the easy availability of credit. The recovery of the economy was eventually initiated after the eased monetary policy and devalued the US dollar along with abandoning the gold standard.

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• THE CRASH OF THE TIGER ECONOMIES OF the 1990s

The 90s saw the booming rise of the Southeast Asian tiger economies(Malaysia, Philippines, Indonesia, Singapore, and Thailand) on the back of exports and liberalization of their market. It led to massive foreign capital flowing into these countries as they started reporting an impressive jump in GDP. This period of boom led to real estate prices which were artificially high. As its relative attractiveness reduced once the United States increased rates and real estate prices became untenable, foreign capital shifted away from these tiger economies. The stock markets in these regions nearly decreased by 50%.

The tiger economies started recovering again in 1999 after the UN intervened with the help of $100 billion to?Thailand and Indonesia. In return, these economies were supposed to privatize state-owned companies.

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• THE BIG DOT COM CRASH IN 1998-2000

Also referred to as the internet bubble, It was initiated due to the relentless flow of easy money into internet-oriented companies. The NASDAQ, rose five times between 1995 and 2000 and fell 76% from 2000 to 2002. During that phase of investing, investors ignored market metrics. However, some companies that started during that phase continue to follow market sentiment.

• THE 1991 ECONOMIC CRISIS IN INDIA

Back home, the 1991 economic crisis is one of the most?trademark moments resulting in the development of the Indian economy. Russia imploding and primarily oil, rising with the Gulf War. It embarked on a journey of liberalization of a huge market.

As part of the journey, India opened its economy to the world players, slashed duties and licensing. The huge population was given access to the global markets.

I really hope that you liked this:)